MySpace Faces Tough Choices With New CEO — UPDATE

MySpace’s corporate overlord seems to have grown tired of the site’s current template and is looking to jazz-up its profile.

With Friday’s replacement of CEO Chris DeWolfe with former Facebook executive Owen Van Natta and talk of a new role for president and default-best-friend Tom Anderson, News Corp. is fighting to maintain MySpace’s position as the top social network in the U.S.

The company clearly hopes to capture some of its rival’s mojo by hiring the 39-year-old Van Natta, who as Facebook’s chief operating officer helped convince Microsoft to invest some $240 million in the company.

By contrast, MySpace, which Rupert Murdoch purchased for $580 million back in 2005, looks poised to join the once-innovative Friendster as a second-tier, seen-better-days social network.

“Not only is MySpace at a crossroads where it’s losing audience, but it’s also at a crossroads because it’s facing the loss of a huge slug of revenue,” said Julia Angwin, Wall Street Journal technology editor and author of the book Stealing MySpace.

One of the company’s biggest revenue drivers is a $900 million deal it signed with Google in 2006 that reeled in $300 million for MySpace, according to analysts. But that deal is set to expire in June 2010.

“The company then has a potential black hole in terms of profitability,” Michael Nathanson, an analyst at Sanford C. Bernstein & Company told the New York Times. “At some point News Corp. has to look at the investments and the current management team,” he said. “It doesn’t surprise me in the least.”

MySpace had 70.1 million unique visitors in March, down 3.6% from a year ago, according to the Wall Street Journal. Its audience has been diminishing with the rise of Facebook, which is now number one globally and which showed March U.S visitors rise 72 percent from a year ago to 61.2 million, according to comScore.

Both founders’ contracts were set to expire in October, but the recent appointment of former AOL CEO Jon Miller as News Corp.’s head of digital operations signalled that change was coming sooner than that. Van Natta will report to Miller.

“News Corp. already saw this train — which wasn’t so hard to see — coming,” said Angwin. “It’s clear now, in retrospect, that his [Jon Miller’s] mandate was to come in and replace these guys.”

Miller stepped in at AOL under similar circumstances, but AOL never really rose back up from the ashes.

Pali Research analyst Richard Greenfield suggested in a report last month that management changes were on the horizon, and goes even further to predict layoffs as a next step. There are about 1,600 people currently on staff.

“I would expect a paring down of the overall operation to bring it in line with the revenues,” he told Wired.com. “I think part of the process is reducing headcount a bit.”

“Whoever ends up actually being [CEO], the challenge is how to reinvigorate, because you clearly have shifted more towards music and away from core social networking, and I think reinvigorating that service is critical,” he said.

MySpace has also had trouble keeping up with other networks like Facebook on the technology and innovation side.

MySpace’s main advantage over FaceBook is its music service, which launched 6 months ago. But even this launch had its problems, including a confusing separation between MySpace artist pages and the MySpace Music site.

“Everyone thinks of MySpace for music, first and foremost,” said Angwin. “So that’s also very strange to take your core strength and sort of fragment it into two different places so people don’t necessarily know where to go.”

The fate of Tom Anderson is still unclear, but his complete removal from the network would likely cause quite a stir in the community as he’s every user’s first friend and the site’s virtual mascot.

Last March when rumors of his death from a car crash circulated online (which he denied Steve Jobs-style as “greatly exaggerated”) commenters on his page exemplified his importance to the site.

“tom. without you theres no myspace && without myspace theres no US! we love you tom.”

“im very gald ur not dead and alive! funny how rumors spread that arent true…u know i had my friends thinking i was dead cuz i wasnt on myspace for like a week lol but Tom without u there is no myspace mann! u r like our god mann! XD”

Perhaps MySpace needs to also make some sort of similar declaration, before everyone starts writing its eulogy.

“These sites never die. They all still exist. I mean Friendster still exists,” said Angwin. “Die is too dramatic, but they become less relevant, that’s for sure.”

Update: This story was updated Friday to include the official announcement of Van Natta’s rumored appointment.